Correlation Between PT Indonesia and Total Bangun

Can any of the company-specific risk be diversified away by investing in both PT Indonesia and Total Bangun at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining PT Indonesia and Total Bangun into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Indonesia Kendaraan and Total Bangun Persada, you can compare the effects of market volatilities on PT Indonesia and Total Bangun and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in PT Indonesia with a short position of Total Bangun. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Indonesia and Total Bangun.

Diversification Opportunities for PT Indonesia and Total Bangun

0.67

Correlation Coefficient

PT Indonesia  Total Bangun

Poor diversification

The 3 months correlation between IPCC and Total is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding PT Indonesia Kendaraan and Total Bangun Persada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Bangun Persada and PT Indonesia is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on PT Indonesia Kendaraan are associated (or correlated) with Total Bangun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Bangun Persada has no effect on the direction of PT Indonesia i.e., PT Indonesia and Total Bangun go up and down completely randomly.

Pair Corralation between PT Indonesia and Total Bangun

Assuming the 90 days trading horizon PT Indonesia is expected to generate 1.43 times less return on investment than Total Bangun. But when comparing it to its historical volatility, PT Indonesia Kendaraan is 2.48 times less risky than Total Bangun. It trades about 0.11 of its potential returns per unit of risk. Total Bangun Persada is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  63,000  in Total Bangun Persada on September 16, 2024 and sell it today you would earn a total of  7,000  from holding Total Bangun Persada or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

PT Indonesia Kendaraan  vs.  Total Bangun Persada

PT Indonesia Kendaraan

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indonesia Kendaraan are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Indonesia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Total Bangun Persada

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Total Bangun Persada are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Total Bangun disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Indonesia and Total Bangun

The main advantage of trading using opposite PT Indonesia and Total Bangun positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Indonesia position performs unexpectedly, Total Bangun can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Total Bangun will offset losses from the drop in Total Bangun's long position.

The idea behind PT Indonesia Kendaraan and Total Bangun Persada pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.